First, allow me to lay it all out there…
Did you know women face a potential $2.5 MILLION loss towards their finances over the period of a lifetime? To be clear, this is assuming a scenario where a woman making $80k (vs. a man making $100K). If a woman makes more than that, the loss compounds even further. YIKES!
I recently had the pleasure of hearing Sallie Krawcheck, CEO of a women-only investment platform called Ellevest, speak on the topic of Gender Neutrality Investing. If you’re thinking what does that even mean - well, I’m about to tell you. Spoiler alert: it’s not pretty.
Before we dive in, know this issue goes well beyond just a pay gap, it trickles down (similar to the wave of fury that took over me when I figured it out) into women’s investments, social security, and even as you walk down the grocery aisle to purchase your (or your wife’s) favorite shampoo. Whether you know it or not, all these factors and more affect women and their financial future. So, let’s start with the facts.
GENDER PAY GAP
Ah yes, these three little words have huge implications.
The facts: Women working in the US made about 80 cents for every $1 earned by a man in 2016 according to the Institute for Women's Policy and Research (IWPR).
What it means: Women are only earning 80% of what men earn for the SAME job.
Among some female minority groups the gap is even worse. Black women, for example, make 61 cents for every $1 earned by a man according to the National Women’s Law Center’s analysis of 2018 Census Bureau data.
INVESTING GAP
When women earn less, they have less to invest. It seems obvious, but do you know how it actually affects their hard-earned investments?
...Let’s explore a hypothetical story about Sally and Bob
Bob earns $100,000 a year and Sally earns $80,000 a year (80%, same job). They both contribute 10% of their salary to a 401(k) and invest in the same investments. This means Bob is putting $10,000 away and Sally is only putting $8,000 away.
What it means: By saving $2,000 less a year that means our girl, Sally, will have $649,000 LESS over her lifetime. That’s a house PAID OFF in most parts of the US! Well, unless you live in Malibu, but that’s beside the point.
RISK GAP
Women (statistically speaking) are naturally more conservative investors and if not fully educated on how to invest this can end up hurting them (myself included).
Men are more willing to take risks (again, statistically speaking). The more risk you take, the higher the return on investment - only if it’s the “right” type of risk (more to come on this).
What it means: Assuming a man invests in an aggressive portfolio (9.63% average return) and a woman invests in a more conservative growth income portfolio (6.99% average return) the total loss over a woman’s lifetime is an unthinkable $2.5 MILLION!
That’s equivalent to a second home, a FULLY paid off vacation home, and a new car!
SOCIAL SECURITY GAP
If women make less that means less money is going towards their social security payout. And if they stay home to take care of the kiddos for a few years and leave the workforce, that’s less money going towards their social security earnings.
What it means: Women will receive less from the government to fund their retirement. Which then means, they have to save MORE than men do.
‘PINK’ TAX?!
...Yes, it’s a real thing.
The facts: According to the New York City Department of Consumer Affairs, women pay 7% more on everyday purchases than men do. If you head over to AxThePinkTax.com, it costs $1,351 more a year just to be a woman. That seems fair, right? Now take that number and multiply it by your age…imagine how much you’ve overpaid!
TO CONCLUDE
I’m an optimist at heart, so I’m here to tell you action and awareness are the first steps. It’s not just the gender pay gap that works against women but, in fact, there are several different ‘gaps’... As a whole, the more educated we are, the more powerful we are.
Here are a few ways we start to close the gender pay gaps:
Negotiate
Go after those promotions
Research your salary and/or speak to a recruiter and make sure you’re fairly compensated amongst your peers
Take a job in a traditional field where you are the minority (Hello, any women want to join me in the male-dominated finance industry?)
I love hearing from you! Are there examples where the pay gap has affected you?
Let’s conquer and close these gaps together! If you would like a financial partner along the way to help you close these gaps schedule a free 30-minute call here.
